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Northrop Grumman: Corporate Rap Sheet

Northrop Grumman

By Philip Mattera

Northrop Grumman, a leading U.S. military contractor, is best known as the producer of the hugely expensive B-2 Stealth bomber, fighter jets such as the F-14 Tomcat featured in the Tom Cruise movie Top Gun, and nuclear-powered submarines and aircraft carriers. Northrop was nearly gobbled up by Lockheed Martin during defense-sector consolidation in the 1990s, but antitrust issues undermined the deal. Northrop went on to carry out some major acquisitions itself, including the Litton and TRW conglomerates and Newport News Shipbuilding (Northrop spun off all its shipyards in 2011). Northrop has been involved in a series of false claims cases that the company has had to spend tens of millions of dollars to settle.

Government Contracting

The first major scandals in Northrop Grumman’s history came in the early 1970s, when the company, then known as Northrop Corp., was embroiled in controversies over illegal campaign contributions to Richard Nixon’s reelection campaign by company chairman Thomas Jones as well as some $30 million in bribes paid to foreign governments to win orders for fighter jets. A few years later, there were revelations that the company regularly entertained Pentagon officials and members of Congress at a hunting lodge on the eastern shore of Maryland.

During the 1980s, Northrop was the subject of numerous investigations relating to alleged mismanagement during its work on the MX Missile and the B-2 Stealth bomber. In 1989, Northrop was indicted on criminal charges of falsifying test results on cruise missiles for the Air Force and Harrier jets for the Marine Corps. Just as the trial in the case was about to begin in 1990, the company agreed to plead guilty to 34 fraud charges and pay a fine of $17 million. Under the plea deal, federal prosecutors agreed to end the investigations relating to the MX and the B-2. However, in 1992 the company had to pay $4.2 million to settle a whistleblower lawsuit—brought without the involvement of the Justice Department—alleging that the company padded its invoices on MX missile guidance system work.

Grumman Corp., acquired by Northrop in 1994, brought with it a history of controversies on issues such as cost overruns in the production of F-14 Tomcat fighters for the Navy, production of defective municipal buses by its Flxible division (sold in 1983) and a bribery scandal involving Iran and Japan.

In 2000 Northrop Grumman paid $1.4 million to settle a whistleblower case alleging that the company overcharged the Air Force for B-2 bomber instruction and repair manuals. In a case inherited through the acquisition of TRW, Northrop Grumman agreed in 2003 to pay $111 million to settle claims that TRW overcharged the Pentagon for work on several space electronics programs in the early 1990s. Also in 2003, Northrop Grumman agreed to pay a total of $80 million to settle two False Claims Act cases, one involving work by Newport News Shipbuilding before Northrop acquired it in 2001 and the other involving the delivery of allegedly defective aerial target drones.

In 2004, Northrop settled for $1.8 million the remaining individual whistleblower case from the late 1980s involving cruise missiles. The following year it paid $62 million to settle the remaining claims relating to overcharging on the B-2 bomber program.

Soon after the U.S. invasion of Iraq, the company’s Vinnell Corp. subsidiary (acquired as part of the purchase of TRW in 2002) was awarded a $48 million contract “to train the nucleus of a new Iraqi army.” It botched the job so badly that the Jordanian Army had to be brought in to take over.

In July 2007 the Justice Department announced that Northrop would pay $8 million to resolve allegations of improperly testing equipment used in night vision goggles and sniper scopes sold to the Pentagon.

A February 20008 U.S. Government Accountability Office report singled out Northrop’s LPD 17 amphibious ship in a review of weapons systems plagued by large cost overruns, delays and quality problems.

In March 2008 a whistleblower brought a lawsuit charging that Northrop Grumman’s Melbourne division with hundreds of millions of dollars of overcharges relating to the Joint STARS radar aircraft program.

In April 2009 Northrop agreed to pay $325 million to settle federal charges that TRW, prior to its acquisition by Northrop, had failed to properly test parts (which turned out to be defective) used in spy satellites built for the National Reconnaissance Office.

In June 2010 Northrop paid $12.5 million to settle federal charges that it neglected to test certain electronic parts it supplied for navigation systems in military aircraft and submarines.

Environment and Product Safety

The site of a former Grumman Aerospace complex in Bethpage, New York was found to contain a plume of contaminated groundwater containing the potentially carcinogenic industrial solvent trichloroethylene (TCE). It was named a state superfund site in 1983. A cleanup program that ended in 2002 turned out to have been insufficient, and local officials have been pressing for a new remediation effort.

Labor

Before it was spun off, Northrop’s shipbuilding operation was marked by contentious labor relations that the company inherited when it acquired Litton Industries and Newport News Shipbuilding in 2001. There had been a bitter dispute dating back to the early 1990s between Avondale Industries and the New Orleans Metal Trades Council, a group of eight unions which had won a representation election for 5,000 workers. Avondale fought the unions, which in turn launched a major corporate campaign against the company. The confrontation deescalated after Litton took over Avondale in 1999 and signed a neutrality agreement with the unions. In 2002, with Litton now part of Northrop Grumman, the dispute was finally settled.

In 2003, there was nearly a strike at the other Litton shipyard inherited by Northrop—the Ingalls operation in Pascagoula , Mississippi. After a 14-day “cooling-off” period a settlement was reached that was approved by a majority of the 7,000 workers covered. Things did not go so smoothly in 2007. The workers in Pascagoula struck the shipyard for 27 days before accepting a revised contract offer from the company.

In 2007 it was reported that guest workers from India employed by Signal International, a Northrop Grumman subcontractor in Pascagoula, were being held against their will.